Tempted to move some VLS into active

Zola.

I am a pretty passive investor.... all my smaller holdings were merged into VLS 80 Acc a while ago to make things simple....the returns have been decent enough, cant complain.

However, I am tempted to move 20% of my VLS holding into Fundsmith Equity Class I, the growth has been so impressive.

Good idea, or bad idea? I know ...chasing past performance etc....

The companies in FSE seem generally big and solid, the fee is a little on the pricey side at 1%, but the gains, if they continue, would be well worth it.

Thoughts?

Prism

Works for me. I have over 50% in Fundsmith. I like the return but I mainly like the investment style

Thrugelmir

Why now would be the question I would be asking/ reasoning with myself before making a fundamental portfolio switch. You'll get varying views from different sources . You need to rationalise them yourself to formulate a strategy going forward. Investing is for the long term. Buy something to hold.

the growth has been so impressive

but the gains, if they continue, would be well worth it

Hindsight bias as it's called is a potentially dangerous mindset. As suggests regret at not having a trend earlier.

the returns have been decent enough, cant complain

Be happy. A good return is better than none at all.

username12345678

I do get the argument about Passive being a sensible, low-cost option that (almost) gives you the market return.

Investing in Active funds is of course looking through the rear view mirror and hoping that the performance that looks good over the past 5 years continues over the next 5.

But if it doesn't and the fund under-performs its benchmark? Do you stick with it or sell?

When it came to putting my own portfolio together I used a mix of index funds, ETF's and active depending on the historical under-performance of active generally within that sector (US large cap for example) amongst other things.

enthusiasticsaver

As they are completely different funds with different investment strategies I am not certain why you would move it. Funds do really well and then they may do really badly.

You have no way of knowing whether fundsmith will continue to do well but regardless of that you presumably you chose vanguard LS80 because it is well diversified, it has low charges and a decent return. If you are going to swap every time you hear of a fund that is doing better at any one particular time you are going to incur an awful lot of charges with no guarantee that the new fund is better.

Move it by all means, it is your money, but because you like the Fundsmith investment approach. It is too heavy in US equities for me.

Cactus_Jack

OP I also have a small amount of Fundsmith along with my VLS. I don't see the harm, but I'd be interesting in reading further replies.

I'm thinking about having 80% of my portolio in VLS 100 and 20% in other stuff just to satisfy that urge to try it out and hopefully make some gains

Audaxer

I would think it is a bad time to move into something like Fundsmith just because it has had such good gains up until now. If you like the performance of that fund, I think it would be better to move 20% into it after an equity crash when it maybe would have incurred a bigger fall than the VLS80.

bostonerimus

You are right not to chase return. If you have a good strategic reason to move some money to Fundsmith then no one's stopping you and indeed many people like a hybrid approach; some indexing and some active. The index investor is always going to get returns lower than the best active funds and if you are not ok with that then you should not be investing in indexes. Fundsmith does have bright shiny returns, but equally they could be as nasty and horrid as Woodford's recent ones next year.

So you need a solid asset allocation plan and you should stick with that through market ups and downs. Ask yourself what you'll do if Fundsmith goes up by 50% or maybe more importantly what you'll do if it's down by 50% and lagging your index funds next year.

bostonerimus

Audaxer wrote: »

I would think it is a bad time to move into something like Fundsmith just because it has had such good gains up until now. If you like the performance of that fund, I think it would be better to move 20% into it after an equity crash when it maybe would have incurred a bigger fall than the VLS80.

How do you know it's a bad time. Next year it could be up another 50% so not investing now would be foolish.

Audaxer

bostonerimus wrote: »

How do you know it's a bad time. Next year it could be up another 50% so not investing now would be foolish.

I don't know it's a bad time - I just said that I think it is. The OP did ask for our thoughts.

IanManc

Zola. wrote: »

I am a pretty passive investor.... all my smaller holdings were merged into VLS 80 Acc a while ago to make things simple....the returns have been decent enough, cant complain.

However, I am tempted to move 20% of my VLS holding into Fundsmith Equity Class I, the growth has been so impressive.

Good idea, or bad idea? I know ...chasing past performance etc....

The companies in FSE seem generally big and solid, the fee is a little on the pricey side at 1%, but the gains, if they continue, would be well worth it.

Thoughts?

Two thoughts:
1. Why did you buy VLS in the first place? Was your strategy wrong, or have you got a good reason to abandon it and follow a new one?
2. The time to have bought Fundsmith is immediately before the growth that you think is "so impressive".